Less than a Decade
Less than a decade after blockchain first emerged as the foundation upon which digital currency bitcoin could thrive, the technology has evolved into something with so much more potential. Nearly every facet of society could benefit from the secure, decentralized database provided by blockchain, and indeed, many already have.
Blockchain has already helped companies across the globe keep track of their international shipments, combat insurance fraud, and develop better autonomous driving systems. The tech has been used to support the implementation of renewable energy, provide refugees with food and supplies, and manage universal basic income (UBI) trials. Some experts predict that blockchain could improve how we collect taxes and vote in elections within the next five to 10 years, and it could even help usher in the era of quantum computing.
Before blockchain can become the foundation upon which the world conducts its financial transactions, we must address a fundamental issue stressing blockchain-supported digital currency markets, such as bitcoin or ether: the problem of liquidity.
Liquidity refers to a market’s ability to handle a transaction without affecting the asset’s price. For example, cash is the most liquid asset, so if someone wanted to buy USD$1 million worth of Euros, the market would be able to absorb the transaction easily. The value of the dollar and the Euro would remain almost completely unaffected, likely changing by less than .01 percent, and the massive amount of available Euros to buy would mean the trader completes their order at roughly the cost they expected when they placed it.
A Volatile Combination
A combination of these two issues contributed to the flash crash ether experienced in June.
After a multi-million dollar market sell order was placed on the GDAX exchange, the value of ether (ETH) dropped by more than 99.9 percent, from $317.81 to $0.10 within a second. The initial sell order dropped the price to $224.48, but this further triggered additional sell orders from customers who had stop loss orders and margin positions. Ether (ETH) sales from the triggered stop loss orders further triggered even more automated stop loss orders, creating a cascading effect that sent the price of ether down to $0.10 within a second.
On the other side: IBM, Westpac and More Trial Blockchain for Bank Guarantees
A group of Australia-based companies have announced the completion of a blockchain trial aimed at digitizing the bank guarantee process for commercial property leasing.
A collaboration with IBM, Westpac, shopping centre operator Scentre Group and ANZ, the group reports it was able to successfully apply distributed ledger technology (DLT) to eliminate the need for current paper-based bank guarantee documents. The participants have released a white paper detailing how the solution worked and how they believe it could be used in other situations that rely on bank guarantees.
“An update of the decades-old process for issuing, tracking and claiming on guarantees is long overdue. With approximately 11,500 retailers across Australia and New Zealand, who use guarantees to support rental obligations, manual tracking of guarantees has been an extremely cumbersome and labour intensive process.” ~ Mark Bloom, chief financial officer at Scentre Group
in addition to eliminating the need for physical document management, Westpac said that the trial also addressed other inefficiencies in the current bank guarantee process, including the challenges in tracking and reporting of a guarantee’s status through multiple changes.
Overall, it’s the latest sign that Australia is building up its research and development on blockchain technology. Last month, the Australian government published two blockchain research studies, and in April, public records showed that Australia’s central bank is involved with several initiatives focused on blockchain tech.
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